Shoulder deformations
First there should be a twist on the upper arm - so when the arm is rotated like that the twisting is distributed in the upper arm and not in the shoulder joint.



There are 3 bones in the upper arm


a control bone that the animator interacts with - the one with custom shape - goes through the whole upper arm. Has no deforms.
2 segment bones both parented to the control bone. The one closer to the shoulder has Copy Rotation turned off and a Damped Track constraint to the second segment bone


The twisting is done with blending bone weights between both segment bones.

The setup of twist is the same for FK rigs, IK rigs, and when there is FK/IK switching it's best to make it on the deform bones.



Second the motion of lifting the arm up is combined of raising the upper arm and the collar bone. The upper arm can lift about only horizontally, then the collar bone takes over and the whole shoulder raises. The lower the arm is the more the raising is done with the upper arm. As the arm goes higher, more movement is done with the collar bone. Having a smooth transition in both rotations is important for it to look natural.



CC attribution: www.sintel.org, model by Angela Guenette, rig by Nathan Vegdahl